Instant Download Investment Madness By John Nofsinger
Check content proof, now:
Why Do You Keep Falling Into the Same Investment Traps?
Why did you chase that hot Internet stock? Why does it feel like you always buy high and sell low? Why does it seem like everyone else is cashing in while you’re left behind? As an investor, your biggest challenge isn’t the market—it’s your own emotions. They erode returns, magnify risks, and cloud judgment.
Drawing on the field of behavioral finance, Investment Madness shows you how to regain control of your decisions and boost your performance. Dr. John Nofsinger reveals how to think more rationally, avoid the overconfidence that drives risky trades, and manage the pride and regret that often block sound decisions. You’ll learn how to view past successes and failures realistically, move beyond the comfort zone of familiar investments, and understand how your memory may distort what really happened.
For both novice and seasoned investors, this book is a guide to spotting and overcoming the psychological traps that derail financial success.
Editorial Reviews
From the Back Cover
⚠️ WARNING: Letting emotions rule your investments can be dangerous to your wealth.
- Think more clearly about your investments
- Why overconfident investors overtrade, take excess risks, and earn weaker returns
- How self-image shapes your trading behavior
- Why trying to avoid regret now can lead to bigger regrets later
- How recent wins or losses can distort today’s decisions
- Why familiarity feels safe—but rarely produces profit
- Is your memory misleading you about past trades? You’re not alone—and here’s what to do
- Not all information is useful: how to resist herd mentality, market fads, and “expert” noise
- How your psychology quietly chips away at profits—and proven ways to fight back
It’s Not the Market. It’s Your Mind.
- Why cling to cash when better returns are available?
- Why delay funding your retirement when you know you should?
- Why keep repeating the same buy-high, sell-low cycle?
It’s not a lack of knowledge—it’s emotion. Investment Madness helps you break free. Dr. Nofsinger exposes the illusion of control, teaches you how to objectively judge your investments, and explains how pride, regret, and herd thinking sabotage results. You’ll also improve your mental accounting, leading to smarter diversification and allocation.
In today’s world of rapid-fire, Internet-driven trading, these psychological pitfalls are more dangerous than ever. This book equips you with practical strategies to build real self-discipline—the foundation of long-term investing success.
About the Author
Dr. John Nofsinger is a finance professor at Washington State University. His 1997 paper, Herding and Feedback Trading by Institutional Investors (with Richard W. Sias), received the “Best of the Best” and “Best Paper in Investments” awards from the Financial Management Association. He has also conducted advanced research for the New York Stock Exchange and the Association for Investment Management and Research. Nofsinger earned his doctorate from Washington State University.
Excerpt: Introduction
We all carry psychological biases that shape how we process information and make decisions. These biases seep into our investment choices, often undermining wealth creation.
This book explores how such biases influence investing and what you can do about them.
What to Expect From This Book
The book is structured into five parts:
- Part 1: Not Thinking Clearly
How overconfidence and other biases distort decision-making, leading to excessive trading or inaction when action is needed. - Part 2: Emotions Rule
How pride, regret, past experiences, and social pressures influence when we sell winners or cling to losers. - Part 3: Functioning of the Brain
How mental accounting, memory shortcuts, and representativeness bias impact diversification and portfolio decisions. - Part 4: Investing and the Internet
How instant information and rapid trading amplify psychological mistakes. - Part 5: What Can I Do About It?
Practical methods—planning, incentives, and rules of thumb—for regaining self-control and avoiding costly errors.
Excerpt. © Reprinted by permission. All rights reserved.
Introduction
We are all prone to having psychological preconceptions or biases that make us behave in certain ways. These biases influence how we assimilate the information we come in contact with on a daily basis. They also have an impact on how we utilize that information to make decisions.
Some of the decisions that are influenced by our psychological biases can have a large impact on our personal wealth – or the lack of it. I have written this book to try to show you how your own psychological biases can creep into your investment decisions and sabotage your attempts at building wealth.
WHAT TO EXPECT FROM THIS BOOK
There are five parts in this book. The first three parts illustrate different psychological biases that affect our daily lives. The chapters in these parts are structured so they are similar to each other. First, I identify the psychological trait and explain using common, daily activities. Then I examine the degree to which investors are affected by the bias. Part 4 demonstrates how the Internet exacerbates these psychological problems. Finally, the chapters in Part 5 describe what investors can do to help themselves.
The chapters in Part 1, “Not Thinking Clearly,” demonstrate how investment decision making is not always rational. As you will see, people set their range of possible outcomes too narrowly. This is part of a broader problem called overconfidence. Overconfident investors trade too much, take too much risk, and earn lower returns. This topic is discussed in Chapter 2 and 3. If overconfidence causes investors to act too frequently, other biases described in Chapter 4 causes investors to fail to act when they should.
Part 2, “Emotions Rule,” shows how the emotions associated with investing affect our decisions. Chapter 5 illustrates how an investor’s view of himself causes him to avoid feelings of regret and to seek pride. Consequently, investors sell winner stocks too soon and hold onto loser stocks too long. Chapter 6 demonstrates that your past failures and successes have a dramatic impact on your current decision making process. Lastly, our emotional state is often affected by the social aspects of investing; we discuss this in Chapter 7.
The third part, “Functioning of the Brain,” shows how the human brain’s processes for interpreting and remembering information affect investors. For example, every day you are bombarded by information. The brain uses a process called mental accounting to store and keep track of important decisions and outcomes. Chapter 8 shows that as a consequence of this process, people make poor financial decisions. Discussed in Chapter 9 is one particularly important implication of how investors view portfolio diversification. The brain also uses shortcuts to quickly process information. This leads to impacts on investor memory (Chapter 10) and the problem of representativeness and familiarity (Chapter 11).
Part 4, “Investing and the Internet,” discusses the interaction among the Internet, psychology, and investing. The Internet allows investors quick access to information, trading, and other investors’ opinions. However, these attributes actually magnify the psychological biases. These issues are addressed in Chapters 12 and 13.
Finally, part 5, “What Can I Do About It?” discusses what the investor can do to avoid these psychological biases. The difficulty of maintaining self-control in the face of the psychological biases is illustrated in Chapter 14. The last chapter shows that planning, incentives, and rules of thumb are helpful in avoiding the common problems.
Product details
Publisher : Pearson P T R; 1st edition (January 1, 2001)
Language : English
About the author
John R. Nofsinger
Dr. Nofsinger is one of the world’s leading experts in behavioral finance. He has authored/coauthored fourteen finance trade books, textbooks, and scholarly books that have been translated into eleven languages. He also a prolific scholar who has published over 70 articles in prestigious scholarly journals and practitioner journals. Dr. Nofsinger is also a frequent speaker on behavioral and financial topics.
